CARRIZO OIL & GAS INC - FORM 10-Q

CARRIZO OIL & GAS INC - FORM 10-Q - August 6, 2015

Attached files

Attached files

file	filename
EX-32.2 - EX 32.2 CFO CERTIFICATION SECTION 906 - CARRIZO OIL & GAS INC	ex3222q15.htm
EX-31.1 - EX 31.1 CEO CERTIFICATION SECTION 302 - CARRIZO OIL & GAS INC	ex3112q15.htm
EX-31.2 - EX 31.2 CFO CERTIFICATION SECTION 302 - CARRIZO OIL & GAS INC	ex3122q15.htm
EX-32.1 - EX 32.1 CEO CERTIFICATION SECTION 906 - CARRIZO OIL & GAS INC	ex3212q15.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_________________________________________________

FORM 10-Q

_________________________________________________



x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2015



o	TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 000-29187-87

_________________________________________________

CARRIZO OIL & GAS, INC.

(Exact name of registrant as specified in its charter)

_________________________________________________



Texas		76-0415919
(State or other jurisdiction of incorporation or organization)		(IRS Employer Identification No.)

500 Dallas Street, Suite 2300, Houston, Texas		77002
(Address of principal executive offices)		(Zip Code)

(713) 328-1000

(Registrant’s telephone number)

____________________________________________________________

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. YES x NO ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). YES x NO ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act (Check one):

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES ¨ NO x

The number of shares outstanding of the registrant’s common stock, par value $0.01 per share, as of July 31, 2015 was 51,963,796.

TABLE OF CONTENTS



		PAGE
Part I. Financial Information
Item 1.	Consolidated Financial Statements (Unaudited)	2
	Consolidated Balance Sheets as of June 30, 2015 and December 31, 2014	2
	Consolidated Statements of Operations for the three and six months ended June 30, 2015 and 2014	3
	Consolidated Statements of Cash Flows for the six months ended June 30, 2015 and 2014	4
	Notes to Consolidated Financial Statements	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	18
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	29
Item 4.	Controls and Procedures	29
Part II. Other Information
Item 1.	Legal Proceedings	30
Item 1A.	Risk Factors	30
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	30
Item 3.	Defaults Upon Senior Securities	30
Item 4.	Mine Safety Disclosures	30
Item 5.	Other Information	30
Item 6.	Exhibits	31
Signatures		32

Part I. Financial Information

Item 1. Consolidated Financial Statements

CARRIZO OIL & GAS, INC. CONSOLIDATED BALANCE SHEETS (In thousands, except share and per share data) (Unaudited)

	June 30, 2015		December 31, 2014
Assets
Current assets
Cash and cash equivalents		$2,004		$10,838
Accounts receivable, net	81,182		92,946
Derivative assets	114,182		171,101
Other current assets	4,096		3,736
Total current assets	201,464		278,621
Property and equipment
Oil and gas properties, full cost method
Proved properties, net	2,312,047		2,086,727
Unproved properties, not being amortized	504,646		535,197
Other property and equipment, net	7,752		7,329
Total property and equipment, net	2,824,445		2,629,253
Derivative assets	20,171		43,684
Debt issuance costs	26,342		25,403
Other assets	5,328		4,515
Total Assets		$3,077,750		$2,981,476

Liabilities and Shareholders’ Equity
Current liabilities
Accounts payable		$81,486		$106,819
Revenues and royalties payable	58,687		66,954
Accrued capital expenditures	75,448		106,149
Accrued interest	20,412		21,149
Liabilities of discontinued operations	4,412		4,405
Deferred income taxes	39,760		61,258
Other current liabilities	60,861		57,570
Total current liabilities	341,066		424,304
Long-term debt	1,372,785		1,351,346
Liabilities of discontinued operations	3,900		8,394
Deferred income taxes	62,112		77,349
Asset retirement obligations	13,862		12,187
Other liabilities	4,012		4,455
Total liabilities	1,797,737		1,878,035
Commitments and contingencies
Shareholders’ equity
Common stock, $0.01 par value, 90,000,000 shares authorized; 51,961,981 issued and outstanding as of June 30, 2015 and 46,127,924 issued and outstanding as of December 31, 2014	520		461
Additional paid-in capital	1,159,291		915,436
Retained earnings	120,202		187,544
Total shareholders’ equity	1,280,013		1,103,441
Total Liabilities and Shareholders’ Equity		$3,077,750		$2,981,476

The accompanying notes are an integral part of these consolidated financial statements.

-2-

CARRIZO OIL & GAS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

(Unaudited)



	Three Months Ended June 30,						Six Months Ended June 30,
	2015			2014			2015			2014
Revenues
Crude oil		$111,257			$165,962			$194,315			$296,324
Natural gas liquids	3,799			5,983			8,272			11,871
Natural gas	8,438			21,530			20,957			42,492
Total revenues	123,494			193,475			223,544			350,687

Costs and Expenses
Lease operating	23,375			17,378			45,091			29,983
Production taxes	5,031			8,182			9,049			14,273
Ad valorem taxes	1,723			1,906			4,756			3,334
Depreciation, depletion and amortization	79,331			80,746			153,202			145,340
General and administrative	19,095			27,682			50,672			55,943
(Gain) loss on derivatives, net	12,595			39,950			(13,844		)	60,630
Interest expense, net	16,999			11,931			35,195			24,356
Loss on extinguishment of debt	38,137			—			38,137			—
Other expense, net	281			413			7,273			987
Total costs and expenses	196,567			188,188			329,531			334,846

Income (Loss) From Continuing Operations Before Income Taxes	(73,073		)	5,287			(105,987		)	15,841
Income tax (expense) benefit	26,103			(2,073		)	37,541			(6,006		)
Income (Loss) From Continuing Operations	(46,970		)	3,214			(68,446		)	9,835
Income (Loss) From Discontinued Operations, Net of Income Taxes	838			(895		)	1,104			(1,540		)
Net Income (Loss)		($46,132	)		$2,319			($67,342	)		$8,295

Net Income (Loss) Per Common Share - Basic
Income (loss) from continuing operations		($0.92	)		$0.07			($1.40	)		$0.22
Income (loss) from discontinued operations, net of income taxes	0.02			(0.02		)	0.02			(0.04		)
Net income (loss)		($0.90	)		$0.05			($1.38	)		$0.18

Net Income (Loss) Per Common Share - Diluted
Income (loss) from continuing operations		($0.92	)		$0.07			($1.40	)		$0.21
Income (loss) from discontinued operations, net of income taxes	0.02			(0.02		)	0.02			(0.03		)
Net income (loss)		($0.90	)		$0.05			($1.38	)		$0.18

Weighted Average Common Shares Outstanding
Basic	51,225			45,213			48,827			45,109
Diluted	51,225			46,158			48,827			45,988

The accompanying notes are an integral part of these consolidated financial statements.

-3-

CARRIZO OIL & GAS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)



	Six Months Ended June 30,
	2015			2014
Cash Flows From Operating Activities
Net income (loss)		($67,342	)		$8,295
(Income) loss from discontinued operations, net of income taxes	(1,104		)	1,540
Adjustments to reconcile income (loss) from continuing operations to net cash provided by operating activities from continuing operations
Depreciation, depletion and amortization	153,202			145,340
(Gain) loss on derivatives, net	(13,844		)	60,630
Net cash received (paid) for derivative settlements	94,193			(17,788		)
Loss on extinguishment of debt	38,137			—
Stock-based compensation, net	14,796			29,139
Deferred income taxes	(37,961		)	305
Non-cash interest expense, net	2,787			1,346
Other, net	5,384			1,594
Changes in operating assets and liabilities-
Accounts receivable	3,732			(23,139		)
Accounts payable	(16,437		)	4,526
Accrued liabilities	(6,605		)	(14,040		)
Other, net	(3,286		)	(2,102		)
Net cash provided by operating activities from continuing operations	165,652			195,646
Net cash used in operating activities from discontinued operations	(1,220		)	(903		)
Net cash provided by operating activities	164,432			194,743
Cash Flows From Investing Activities
Capital expenditures - oil and gas properties	(377,995		)	(474,011		)
Capital expenditures - other property and equipment	(1,173		)	(375		)
Proceeds from sales of oil and gas properties, net	285			7,434
Other, net	(3,684		)	1,913
Net cash used in investing activities from continuing operations	(382,567		)	(465,039		)
Net cash used in investing activities from discontinued operations	(937		)	(4,679		)
Net cash used in investing activities	(383,504		)	(469,718		)
Cash Flows From Financing Activities
Issuance of senior notes	650,000			—
Tender and redemption of senior notes	(626,681		)	—
Payment of deferred purchase payment	(150,000		)	—
Borrowings under credit agreement	800,939			293,000
Repayments of borrowings under credit agreement	(683,939		)	(172,000		)
Payments of debt issuance costs	(11,443		)	(594		)
Sale of common stock, net of offering costs	231,316			—
Excess tax benefits from stock-based compensation	—			5,678
Proceeds from stock options exercised	46			74
Net cash provided by financing activities from continuing operations	210,238			126,158
Net cash provided by financing activities from discontinued operations	—			—
Net cash provided by financing activities	210,238			126,158
Net Decrease in Cash and Cash Equivalents	(8,834		)	(148,817		)
Cash and Cash Equivalents, Beginning of Period	10,838			157,439
Cash and Cash Equivalents, End of Period		$2,004			$8,622

The accompanying notes are an integral part of these consolidated financial statements.

-4-

CARRIZO OIL & GAS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. Basis of Presentation

Nature of Operations

Carrizo Oil & Gas, Inc. is a Houston-based energy company which, together with its subsidiaries (collectively, the “Company”), is actively engaged in the exploration, development, and production of oil and gas primarily from resource plays located in the United States. The Company’s current operations are principally focused in proven, producing oil and gas plays primarily in the Eagle Ford Shale in South Texas, the Utica Shale in Ohio, the Delaware Basin in West Texas, the Niobrara Formation in Colorado, and the Marcellus Shale in Pennsylvania.

Consolidated Financial Statements

The accompanying unaudited interim consolidated financial statements include the accounts of the Company after elimination of intercompany transactions and balances and have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) and therefore do not include all disclosures required for financial statements prepared in conformity with accounting principles generally accepted in the U.S. (“GAAP”). In the opinion of management, these financial statements include all adjustments (consisting of normal recurring accruals and adjustments) necessary to present fairly, in all material respects, the Company’s interim financial position, results of operations and cash flows. However, the results of operations for the periods presented are not necessarily indicative of the results of operations that may be expected for the full year. These financial statements and related notes included in this Quarterly Report on Form 10-Q should be read in conjunction with the Company’s audited Consolidated Financial Statements and related notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014 (“2014 Annual Report”). Certain reclassifications have been made to prior period amounts to conform to the current period presentation. Such reclassifications had no material impact on prior period amounts.

2. Summary of Significant Accounting Policies

The Company has provided a discussion of significant accounting policies, estimates, and judgments in “Note 2. Summary of Significant Accounting Policies” of the Notes to Consolidated Financial Statements in its 2014 Annual Report. There have been no changes to the Company’s significant accounting policies since December 31, 2014.

Recent Accounting Pronouncements

In April 2015, the Financial Accounting Standards Board issued Accounting Standards Update No. 2015-03, Simplifying the Presentation of Debt Issuance Costs (the “ASU”). The objective of this ASU is to simplify the presentation of debt issuance costs in financial statements by presenting such costs in the balance sheet as a direct deduction from the related debt rather than as an asset. The ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015 and applied retrospectively with early adoption permitted. The adoption of the ASU will not have an impact on the Company’s consolidated financial statements, other than balance sheet reclassifications.

3. Discontinued Operations

On February 22, 2013, the Company closed on the sale of Carrizo UK Huntington Ltd, a wholly owned subsidiary of the Company (“Carrizo UK”), and all of its interest in the Huntington Field discovery, including a 15% non-operated working interest and certain overriding royalty interests, to a subsidiary of Iona Energy Inc. (“Iona Energy”) for an agreed-upon price of $184.0 million, including the assumption and repayment by Iona Energy of the $55.0 million of borrowings outstanding under Carrizo UK’s senior secured multicurrency credit facility as of the closing date. The liabilities, results of operations and cash flows associated with Carrizo UK have been classified as discontinued operations in the consolidated financial statements. The liabilities of discontinued operations of $8.3 million and $12.8 million as of June 30, 2015 and December 31, 2014, respectively, relate to an accrual for estimated future obligations related to the sale.

-5-

The following table summarizes the amounts included in income (loss) from discontinued operations, net of income taxes presented in the consolidated statements of operations:



	Three Months Ended June 30,						Six Months Ended June 30,
	2015			2014			2015			2014
	(In thousands)
Revenues		$—			$—			$—			$—

Costs and expenses
General and administrative	1,166			466			1,367			903
Increase (decrease) in estimated future obligations	(3,086		)	913			(3,695		)	1,448
(Gain) loss on derivatives, net	—			(2		)	—			18
Income (Loss) From Discontinued Operations Before Income Taxes	1,920			(1,377		)	2,328			(2,369		)
Income tax (expense) benefit	(1,082		)	482			(1,224		)	829
Income (Loss) From Discontinued Operations, Net of Income Taxes		$838			($895	)		$1,104			($1,540	)

Carrizo UK is a disregarded entity for U.S. federal income tax purposes. Accordingly, the income tax (expense) benefit reflected above includes the Company’s U.S. deferred income tax (expense) benefit associated with the income (loss) from discontinued operations before income taxes. The related U.S. deferred tax assets and liabilities have been classified as deferred income taxes of continuing operations in the consolidated balance sheets.

4. Property and Equipment, Net

As of June 30, 2015 and December 31, 2014, total property and equipment, net consisted of the following:



	June 30, 2015			December 31, 2014
	(In thousands)
Proved properties		$3,550,822			$3,174,268
Accumulated depreciation, depletion and amortization	(1,238,775		)	(1,087,541		)
Proved properties, net	2,312,047			2,086,727
Unproved properties, not being amortized
Unevaluated leasehold and seismic costs	382,953			401,954
Exploratory wells in progress	59,485			71,402
Capitalized interest	62,208			61,841
Total unproved properties, not being amortized	504,646			535,197
Other property and equipment	17,190			16,017
Accumulated depreciation	(9,438		)	(8,688		)
Other property and equipment, net	7,752			7,329
Total property and equipment, net		$2,824,445			$2,629,253

Capitalized oil and gas property costs within a cost center are amortized on an equivalent unit-of-production method, converting natural gas to barrels of oil equivalent at the ratio of six thousand cubic feet of gas to one barrel of oil, which represents their approximate relative energy content. Average depreciation, depletion and amortization (“DD&A”) per Boe of proved properties was $23.81 and $26.34 for the three months ended June 30, 2015 and 2014, respectively, and $23.63 and $26.49 for the six months ended June 30, 2015 and 2014, respectively.

The Company capitalized internal costs of employee compensation and benefits, including stock-based compensation, directly associated with acquisition, exploration and development activities totaling $5.1 million and $5.3 million for the three months ended June 30, 2015 and 2014, respectively, and $10.9 million and $10.7 million for the six months ended June 30, 2015 and 2014, respectively.

Unproved properties, not being amortized, include unevaluated leasehold and seismic costs associated with specific unevaluated properties, the cost of exploratory wells in progress and related capitalized interest. The Company capitalized interest costs associated with its unproved properties totaling $9.0 million and $8.6 million for the three months ended June 30, 2015 and 2014, respectively, and $18.7 million and $16.3 million for the six months ended June 30, 2015 and 2014, respectively.

-6-

5. Income Taxes

The Company’s estimated annual effective income tax rates are used to allocate expected annual income tax expense or benefit to interim periods. The rates are the ratio of estimated annual income tax expense or benefit to estimated annual income or loss before income taxes by taxing jurisdiction, except for discrete items, which are significant, unusual or infrequent items for which income taxes are computed and recorded in the interim period in which the discrete item occurs. The estimated annual effective income tax rates are applied to the year-to-date income or loss before income taxes by taxing jurisdiction to determine the income tax expense or benefit allocated to the interim period. The Company updates its estimated annual effective income tax rates at the end of each quarterly period considering the geographic mix of income based on the tax jurisdictions in which the Company operates. Actual results that are different from the assumptions used in estimating the annual effective income tax rates will impact future income tax expense or benefit. Income tax (expense) benefit differs from income tax (expense) benefit computed by applying the U.S. Federal statutory corporate income tax rate of 35% to income (loss) from continuing operations before income taxes as follows:



	Three Months Ended June 30,						Six Months Ended June 30,
	2015			2014			2015			2014
	(In thousands)
Income (loss) from continuing operations before income taxes		($73,073	)		$5,287			($105,987	)		$15,841
Income tax (expense) benefit at the statutory rate	25,575			(1,850		)	37,095			(5,544		)
State income taxes, net of U.S. Federal income tax benefit	(145		)	(222		)	(221		)	(414		)
2015 Texas Franchise Tax rate reduction, net of U.S. Federal income tax expense	1,671			—			1,671			—
Other	(998		)	(1		)	(1,004		)	(48		)
Total income tax (expense) benefit from continuing operations		$26,103			($2,073	)		$37,541			($6,006	)

6. Long-Term Debt

Long-term debt consisted of the following as of June 30, 2015 and December 31, 2014:



	June 30, 2015		December 31, 2014
	(In thousands)
Long-term debt
Deferred purchase payment due 2015		$—		$150,000
Unamortized discount for deferred purchase payment	—		(1,100		)
Senior Secured Revolving Credit Facility due 2018	117,000		—
8.625% Senior Notes due 2018	—		600,000
Unamortized discount for 8.625% Senior Notes	—		(3,444		)
7.50% Senior Notes due 2020	600,000		600,000
Unamortized premium for 7.50% Senior Notes	1,360		1,465
6.25% Senior Notes due 2023	650,000		—
Other long-term debt due 2028	4,425		4,425
Total long-term debt		$1,372,785		$1,351,346

Senior Secured Revolving Credit Facility

The Company has a senior secured revolving credit facility with a syndicate of banks that, as of June 30, 2015, had a borrowing base of $685.0 million, with $117.0 million of borrowings outstanding with a weighted average interest rate of 1.67%. As of June 30, 2015, the Company also had $0.6 million in letters of credit outstanding which reduced the amounts available under the revolving credit facility. The credit agreement governing the revolving credit facility provides for interest only payments until July 2, 2018, when the credit agreement matures and any outstanding borrowings are due. The borrowing base under the credit agreement is subject to regular redeterminations in the Spring and Fall of each year, as well as special redeterminations described in the credit agreement, in each case which may reduce the amount of the borrowing base. The amount the Company is able to borrow with respect to the borrowing base is subject to compliance with the financial covenants and other provisions of the credit agreement governing the revolving credit facility.

On May 5, 2015, the Company entered into the sixth amendment to the senior secured revolving credit agreement to, among other things, (i) establish an approved borrowing base of $685.0 million until the next redetermination thereof, (ii) establish a swing

-7-

line commitment under the revolving credit facility not to exceed $15.0 million and (iii) include seven additional banks to its banking syndicate, bringing the total number of banks to 19 as of the date of such amendment.

The obligations of the Company under the credit agreement are guaranteed by the Company’s material domestic subsidiaries and are secured by liens on substantially all of the Company’s assets, including a mortgage lien on oil and gas properties having at least 80% of the proved reserve value of the oil and gas properties included in the determination of the borrowing base.

Amounts outstanding under the credit agreement bear interest at the Company’s option at either (i) a base rate for a base rate loan plus the margin set forth in the table below, where the base rate is defined as the greatest of the prime rate, the federal funds rate plus 0.50% and the adjusted LIBO rate plus 1.00%, or (ii) an adjusted LIBO rate for a Eurodollar loan plus the margin set forth in the table below. The Company also incurs commitment fees as set forth in the table below on the unused portion of lender commitments, and which are included as a component of interest expense.



Ratio of Outstanding Borrowings and Letters of Credit to Lender Commitments	Applicable Margin for Base Rate Loans	Applicable Margin for Eurodollar Loans	Commitment Fee
Less than 25%	0.50%	1.50%	0.375%
Greater than or equal to 25% but less than 50%	0.75%	1.75%	0.375%
Greater than or equal to 50% but less than 75%	1.00%	2.00%	0.500%
Greater than or equal to 75% but less than 90%	1.25%	2.25%	0.500%
Greater than or equal to 90%	1.50%	2.50%	0.500%

The Company is subject to certain covenants under the terms of the credit agreement, which include the maintenance of the following financial covenants determined as of the last day of each quarter: (1) a ratio of Total Debt to EBITDA (as defined in the credit agreement) of not more than 4.00 to 1.00; and (2) a Current Ratio (as defined in the credit agreement) of not less than 1.00 to 1.00. As defined in the credit agreement, Total Debt excludes debt discounts and premiums and is net of cash and cash equivalents, EBITDA is for the last four quarters after giving pro forma effect to certain material acquisitions and dispositions of oil and gas properties, and the Current Ratio includes an add back of the unused portion of lender commitments. As of June 30, 2015, the ratio of Total Debt to EBITDA was 2.61 to 1.00 and the Current Ratio was 2.75 to 1.00. Because the financial covenants are determined as of the last day of each quarter, the ratios can fluctuate significantly period to period as the amounts outstanding under the credit agreement are dependent on the timing of cash flows from operations, capital expenditures, acquisitions and dispositions of oil and gas properties and securities offerings.

The credit agreement also places restrictions on the Company and certain of its subsidiaries with respect to additional indebtedness, liens, dividends and other payments to shareholders, repurchases or redemptions of the Company’s common stock, redemptions of senior notes, investments, acquisitions, mergers, asset dispositions, transactions with affiliates, hedging transactions and other matters.

The credit agreement is subject to customary events of default, including in connection with a change in control. If an event of default occurs and is continuing, the lenders may elect to accelerate amounts due under the credit agreement (except in the case of a bankruptcy event of default, in which case such amounts will automatically become due and payable).

8.625% Senior Notes due 2018

Since October 15, 2014, the Company had the right to redeem all or a portion of the 8.625% Senior Notes at redemption prices decreasing from 104.313% to 100% of the principal amount on October 15, 2017, plus accrued and unpaid interest. On April 14, 2015, the Company commenced a cash tender offer for any or all of the outstanding $600.0 million aggregate principal amount of its 8.625% Senior Notes. The tender offer expired on April 23, 2015. On April 28, 2015, the Company made an aggregate cash payment of $276.4 million for the $264.2 million aggregate principal amount of 8.625% Senior Notes validly tendered in the tender offer. This represented a tender offer premium totaling $12.2 million, equal to $1,046.13 for each $1,000 principal amount of 8.625% Senior Notes validly tendered and accepted for payment pursuant to the tender offer. In addition, all 8.625% Senior Notes accepted for payment received accrued and unpaid interest of $0.8 million from the last interest payment date up to, but not including, the settlement date.

In connection with the cash tender offer, the Company also sent a notice of redemption to the trustee for its 8.625% Senior Notes to conditionally call for redemption on May 14, 2015 all of the 8.625% Senior Notes then outstanding, conditioned upon and subject to the Company receiving specified net proceeds from one or more securities offerings, which conditions were satisfied. On May 14, 2015, the Company paid an aggregate redemption price of $352.6 million, including a redemption premium of $14.5 million, which represented 104.313% of the principal amount of the then outstanding 8.625% Senior Notes (or $1,043.13 for each $1,000 principal amount of the 8.625% Senior Notes) plus accrued and unpaid interest of $2.3 million from the last interest payment date up to, but not including, the redemption date, to redeem the then outstanding $335.8 million aggregate principal amount of

-8-

8.625% Senior Notes. As a result of the cash tender offer and the redemption of the 8.625% Senior Notes, the Company recorded a loss on extinguishment of debt of $38.1 million during the three and six months ended June 30, 2015, which includes the premium paid to repurchase the 8.625% Senior Notes of $26.7 million and non-cash charges of $11.4 million attributable to the write-off of unamortized debt issuance costs and the remaining discount associated with the 8.625% Senior Notes.

6.25% Senior Notes due 2023

On April 28, 2015, the Company closed a public offering of $650.0 million aggregate principal amount of 6.25% Senior Notes due 2023. The Company received proceeds of approximately $640.3 million, net of underwriting discounts and commissions. The net proceeds were used to fund the repurchase and redemption of the 8.625% Senior Notes described above as well as to temporarily repay borrowings outstanding under the Company’s revolving credit facility. The 6.25% Senior Notes bear interest at 6.25% per annum which is payable semi-annually on each April 15 and October 15 and mature on April 15, 2023. Before April 15, 2018, the Company may, at its option, redeem all or a portion of the 6.25% Senior Notes at 100% of the principal amount plus a make-whole premium. Thereafter, the Company may redeem all or a portion of the 6.25% Senior Notes at redemption prices decreasing from 104.688% to 100% of the principal amount on April 15, 2018, plus accrued and unpaid interest. The 6.25% Senior Notes were guaranteed by the same subsidiaries that also guarantee the 7.50% Senior Notes and the revolving credit facility.

The indenture governing the 6.25% Senior Notes, which is substantially similar to the indenture governing the 7.50% Senior Notes, contains covenants that, among other things, limit the Company’s ability and the ability of its restricted subsidiaries to: pay distributions on, purchase or redeem the Company’s common stock or other capital stock or redeem the Company’s subordinated debt; make investments; incur or guarantee additional indebtedness or issue certain types of equity securities; create certain liens; sell assets; consolidate, merge or transfer all or substantially all of the Company’s assets; enter into agreements that restrict distributions or other payments from the Company’s restricted subsidiaries to the Company; engage in transactions with affiliates; and create unrestricted subsidiaries. Such indentures governing the Company’s senior notes are also subject to customary events of default, including those related to failure to comply with the terms of the notes and the indenture, certain failures to file reports with the SEC, certain cross defaults of other indebtedness and mortgages and certain failures to pay final judgments.

7. Commitments and Contingencies

From time to time, the Company is party to certain legal actions and claims arising in the ordinary course of business. While the outcome of these events cannot be predicted with certainty, management does not currently expect these matters to have a materially adverse effect on the financial position or results of operations of the Company.

The results of operations and financial position of the Company continue to be affected from time to time in varying degrees by domestic and foreign political developments as well as legislation and regulations pertaining to restrictions on crude oil and natural gas production, imports and exports, natural gas regulation, tax increases, environmental regulations and cancellation of contract rights. Both the likelihood and overall effect of such occurrences on the Company vary greatly and are not predictable.

8. Shareholders’ Equity

Common Stock Offering

On March 20, 2015, the Company completed its public offering of 5.2 million shares of its common stock at a price of $44.75 per share, which generated proceeds of $231.3 million, net of offering costs. The net proceeds from the common stock offering were used to repay a portion of the borrowings under the Company’s revolving credit facility and for general corporate purposes.

Exercise of Warrants

On November 24, 2009, the Company entered into an agreement with an unrelated third party and its affiliate under which the Company issued 118,200 warrants to purchase shares of the Company’s common stock. In May 2015, the holders of the warrants exercised all warrants outstanding on a “cashless” basis at an exercise price of $22.09 resulting in the issuance of 71,913 net shares of the Company’s common stock.

-9-

Stock-Based Compensation

The Company recognized the following stock-based compensation expense, net for the periods indicated which is reflected as general and administrative expense in the consolidated statements of operations:



	Three Months Ended June 30,						Six Months Ended June 30,
	2015			2014			2015			2014
	(In thousands)
Stock appreciation rights		($49	)		$11,116			$5,891			$19,572
Restricted stock awards and units	6,014			8,224			11,229			13,925
Performance share awards	496			319			765			333
	6,461			19,659			17,885			33,830
Less: amounts capitalized to proved and unproved properties	(1,518		)	(2,681		)	(3,089		)	(4,691		)
Total stock-based compensation expense, net		$4,943			$16,978			$14,796			$29,139
Income tax benefit		$1,731			$5,943			$5,179			$10,199

9. Earnings Per Share

Supplemental income (loss) from continuing operations per common share information is provided below:



	Three Months Ended June 30,					Six Months Ended June 30,
	2015			2014		2015			2014
	(In thousands, except per share amounts)
Income (Loss) from Continuing Operations		($46,970	)		$3,214		($68,446	)		$9,835
Basic weighted average common shares outstanding	51,225			45,213		48,827			45,109
Effect of dilutive instruments	—			945		—			879
Diluted weighted average common shares outstanding	51,225			46,158		48,827			45,988
Income (Loss) from Continuing Operations Per Common Share
Basic		($0.92	)		$0.07		($1.40	)		$0.22
Diluted		($0.92	)		$0.07		($1.40	)		$0.21

Basic income (loss) from continuing operations per common share is based on the weighted average number of shares of common stock outstanding during the period. Diluted income (loss) from continuing operations per common share is based on the weighted average number of common shares and all potentially dilutive common shares outstanding during the period which include restricted stock awards and units, performance share awards, stock options and warrants. When a loss from continuing operations exists, all potentially dilutive common shares outstanding are anti-dilutive and therefore excluded from the calculation of diluted weighted average shares outstanding.

For the three and six months ended June 30, 2015, the calculation of diluted weighted average common shares outstanding excluded the anti-dilutive effect of 0.7 million shares of restricted stock awards and units, performance share awards, options and warrants due to the loss from continuing operations. For the three and six months ended June 30, 2014, the number of shares of restricted stock awards and units, performance share awards, options and warrants excluded were insignificant.

10. Derivative Instruments

The Company uses commodity derivative instruments, primarily fixed price swaps and costless collars, to reduce its exposure to commodity price volatility for a substantial, but varying, portion of its forecasted crude oil and natural gas production up to 36 months and thereby achieve a more predictable level of cash flows to support the Company’s drilling and completion capital expenditure program. Costless collars are designed to establish floor and ceiling prices on anticipated future production. While the use of collars limit the downside risk of adverse price movements below the floor price, collars also limit the benefit of favorable price movements above the ceiling price. The Company does not enter into derivative instruments for speculative or trading purposes.

-10-

The Company typically has numerous hedge positions that span several time periods and often result in both fair value asset and liability positions held with that counterparty, which positions are all offset to a single fair value asset or liability at the end of each reporting period. The Company nets its derivative instrument fair value amounts executed with the same counterparty pursuant to ISDA master agreements, which provide for net settlement over the term of the contract and in the event of default or termination of the contract. The fair value of derivative instruments where the Company is in a net asset position with its counterparties as of June 30, 2015 and December 31, 2014 totaled $134.4 million and $214.8 million, respectively, and is summarized by counterparty in the table below:



Counterparty	June 30, 2015		December 31, 2014
Wells Fargo	57	%	37	%
Societe Generale	27	%	26	%
Regions	10	%	8	%
Union Bank	5	%	4	%
Royal Bank of Canada	1	%	1	%
Credit Suisse	—	%	24	%
Total	100	%	100	%

The counterparties to the Company’s derivative instruments are lenders under the Company’s credit agreement. Because each of the lenders have investment grade credit ratings, the Company believes it does not have significant credit risk and accordingly does not currently require its counterparties to post collateral to support the net asset positions of its derivative instruments. As such, the Company is exposed to credit risk to the extent of nonperformance by the counterparties to its derivative instruments. Although the Company does not currently anticipate such nonperformance, it continues to monitor the credit ratings of its counterparties.

For the three months ended June 30, 2015 and 2014, the Company recorded in the consolidated statements of operations a loss on derivatives, net of $12.6 million and $40.0 million, respectively. For the six months ended June 30, 2015 and 2014, the Company recorded in the consolidated statements of operations a gain on derivatives, net of $13.8 million and a loss on derivatives, net of $60.6 million, respectively.

On February 11, 2015, the Company entered into derivative transactions offsetting its then existing crude oil derivative positions covering the periods from March 2015 through December 2016. As a result of the offsetting derivative transactions, the Company locked in $166.4 million of cash flows, of which $40.0 million was received due to contract settlements during the three and six months ended June 30, 2015. As of June 30, 2015, the remaining locked in value of cash flows is $126.4 million, of which $106.5 million is classified as a current derivative asset and $19.9 million is classified as a noncurrent derivative asset in the consolidated balance sheets. These locked in cash flows are not subject to price risk and will be received as the applicable contracts settle. Included in the $13.8 million gain on derivatives, net for the six months ended June 30, 2015, is an $8.4 million gain representing the increase in fair value of the crude oil derivative positions from December 31, 2014 to February 11, 2015. Additionally, on February 13, 2015, the Company entered into costless collars for the periods from March 2015 through December 2016 which will continue to provide the Company with downside protection at crude oil prices below the weighted average floor prices yet allow the Company to benefit from an increase in crude oil prices up to the weighted average ceiling prices.

The following sets forth a summary of the Company’s crude oil derivative positions, including additional costless collars entered into subsequent to the February 13, 2015 costless collars described above, at average NYMEX prices as of June 30, 2015:



Period	Type of Contract	Volumes (in Bbls/d)	Weighted Average Floor Price ($/Bbl)		Weighted Average Ceiling Price ($/Bbl)
July - December 2015	Costless Collars	16,200		$50.00	$67.34
January - December 2016	Costless Collars	5,490		$50.96	$74.73

The following sets forth a summary of the Company’s natural gas derivative positions at average NYMEX prices as of June 30, 2015:



Period	Type of Contract	Volumes (in MMBtu/d)	Weighted Average Floor Price ($/MMBtu)
July - December 2015	Fixed Price Swaps	30,000		$4.29

-11-

11. Fair Value Measurements

Accounting guidelines for measuring fair value establish a three-level valuation hierarchy for disclosure of fair value measurements. The valuation hierarchy categorizes assets and liabilities measured at fair value into one of three different levels depending on the observability of the inputs employed in the measurement. The three levels are defined as follows:

Level 1 – Observable inputs such as quoted prices in active markets at the measurement date for identical, unrestricted assets or liabilities.

Level 2 – Other inputs that are observable directly or indirectly such as quoted prices in markets that are not active, or inputs which are observable, either directly or indirectly, for substantially the full term of the asset or liability.

Level 3 – Unobservable inputs for which there is little or no market data and which the Company makes its own assumptions about how market participants would price the assets and liabilities.

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The following tables summarize the location and amounts of the Company’s assets and liabilities measured at fair value on a recurring basis as presented in the consolidated balance sheets as of June 30, 2015 and December 31, 2014. All items included in the tables below are Level 2 inputs within the fair value hierarchy:



	June 30, 2015
	Gross Amounts Recognized			Gross Amounts Offset in the Consolidated Balance Sheets			Net Amounts Presented in the Consolidated Balance Sheets
	(In thousands)
Derivative assets
Derivative assets-current		$123,669			($9,487	)		$114,182
Derivative assets-noncurrent	20,289			(118		)	20,171
Derivative liabilities
Other current liabilities	(9,605		)	9,487			(118		)
Other liabilities	(118		)	118			—
Total		$134,235			$—			$134,235



	December 31, 2014
	Gross Amounts Recognized			Gross Amounts Offset in the Consolidated Balance Sheets			Net Amounts Presented in the Consolidated Balance Sheets
	(In thousands)
Derivative assets
Derivative assets-current		$183,625			($12,524	)		$171,101
Derivative assets-noncurrent	44,725			(1,041		)	43,684
Derivative liabilities
Other current liabilities	(12,707		)	12,524			(183		)
Other liabilities	(1,058		)	1,041			(17		)
Total		$214,585			$—			$214,585

The fair values of the Company’s derivative assets and liabilities are based on a third-party industry-standard pricing model that uses market data obtained from third-party sources, including quoted forward prices for crude oil and natural gas, discount rates and volatility factors. The fair values are also compared to the values provided by the counterparties for reasonableness and are adjusted for the counterparties’ credit quality for derivative assets and the Company’s credit quality for derivative liabilities. To date, adjustments for credit quality have not had a material impact on the fair values.

The derivative asset and liability fair values reported in the consolidated balance sheets that pertain to the Company’s derivative instruments, as well as the Company’s crude oil derivative instruments that were entered into subsequent to the offsetting derivative transactions, are as of a particular point in time and subsequently change as these estimates are revised to reflect actual results, changes in market conditions and other factors. However, the fair value of the net derivative asset attributable to the offsetting crude oil derivative transactions are not subject to price risk as changes in the fair value of the original positions are offset by changes in the fair value of the offsetting positions. The Company typically has numerous hedge positions that span several time

-12-

periods and often result in both derivative assets and liabilities with the same counterparty, which positions are all offset to a single derivative asset or liability in the consolidated balance sheets. The Company nets the fair values of its derivative assets and liabilities associated with derivative instruments executed with the same counterparty pursuant to ISDA master agreements, which provide for net settlement over the term of the contract and in the event of default or termination of the contract. The Company had no transfers into Level 1 and no transfers into or out of Level 2 for the six months ended June 30, 2015 and 2014.

Fair Value of Other Financial Instruments

The Company’s other financial instruments consist of cash and cash equivalents, receivables, payables and long-term debt, which are classified as Level 1 under the fair value hierarchy with the exception of the deferred purchase payment, which is classified as Level 2 under the fair value hierarchy. The carrying amounts of cash and cash equivalents, receivables, and payables approximate fair value due to the highly liquid or short-term nature of these instruments. The carrying amount of long-term debt under the Company’s revolving credit facility approximates fair value as borrowings bear interest at variable rates. The following table presents the carrying amounts of long-term debt with the fair values of the Company’s senior notes and other long-term debt based on quoted market prices and the fair value of the deferred purchase payment based on indirect observable market rates.



	June 30, 2015				December 31, 2014
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
	(In thousands)
8.625% Senior Notes due 2018		$—		$—		$596,555		$597,000
7.50% Senior Notes due 2020	601,360		630,000		601,466		573,000
6.25% Senior Notes due 2023	650,000		648,375		—		—
Other long-term debt due 2028	4,425		4,204		4,425		4,071
Deferred purchase payment due 2015	—		—		148,900		148,558

12. Condensed Consolidating Financial Information

The rules of the SEC require that condensed consolidating financial information be provided for a subsidiary that has guaranteed the debt of a registrant issued in a public offering, where the guarantee is full, unconditional and joint and several and where the voting interest of the subsidiary is 100% owned by the registrant. The Company is, therefore, presenting condensed consolidating financial information on a parent company, combined guarantor subsidiaries, combined non-guarantor subsidiaries and consolidated basis and should be read in conjunction with the consolidated financial statements. The financial information may not necessarily be indicative of results of operations, cash flows, or financial position had such guarantor subsidiaries operated as independent entities.

Investments in subsidiaries are accounted for by the respective parent company using the equity method for purposes of this presentation. Results of operations of subsidiaries are therefore reflected in the parent company’s investment accounts and earnings. The principal elimination entries set forth below eliminate investments in subsidiaries and intercompany balances and transactions. Typically in a condensed consolidating financial statement, the net income and equity of the parent company equals the net income and equity of the consolidated entity. The Company’s oil and gas properties are accounted for using the full cost method of accounting whereby impairments and DD&A are calculated and recorded on a country by country basis. However, when calculated separately on a legal entity basis, the combined totals of parent company and subsidiary impairments and DD&A can be more or less than the consolidated total as a result of differences in the properties each entity owns including amounts of costs incurred, production rates, reserve mix, future development costs, etc. Accordingly, elimination entries are required to eliminate any differences between consolidated and parent company and subsidiary company combined impairments and DD&A.

-13-

CARRIZO OIL & GAS, INC.

CONDENSED CONSOLIDATING BALANCE SHEETS

(In thousands)

(Unaudited)



	June 30, 2015
	Parent Company		Combined Guarantor Subsidiaries		Combined Non- Guarantor Subsidiaries		Eliminations			Consolidated
Assets
Total current assets		$2,404,178		$79,119		$—		($2,281,833	)		$201,464
Total property and equipment, net	31,995		2,757,601		3,028		31,821			2,824,445
Investment in subsidiaries	240,306		—		—		(240,306		)	—
Other assets	142,362		—		—		(90,521		)	51,841
Total Assets		$2,818,841		$2,836,720		$3,028		($2,580,839	)		$3,077,750

Liabilities and Shareholders’ Equity
Current liabilities		$173,022		$2,449,862		$3,028		($2,284,846	)		$341,066
Long-term liabilities	1,379,611		146,552		—		(69,492		)	1,456,671
Total shareholders’ equity	1,266,208		240,306		—		(226,501		)	1,280,013
Total Liabilities and Shareholders’ Equity		$2,818,841		$2,836,720		$3,028		($2,580,839	)		$3,077,750



	December 31, 2014
	Parent Company		Combined Guarantor Subsidiaries		Combined Non- Guarantor Subsidiaries		Eliminations			Consolidated
Assets
Total current assets		$2,380,445		$245,051		$111		($2,346,986	)		$278,621
Total property and equipment, net	613		2,562,029		39,939		26,672			2,629,253
Investment in subsidiaries	233,173		—		—		(233,173		)	—
Other assets	140,774		—		—		(67,172		)	73,602
Total Assets		$2,755,005		$2,807,080		$40,050		($2,620,659	)		$2,981,476

Liabilities and Shareholders’ Equity
Current liabilities		$296,686		$2,434,649		$39,955		($2,346,986	)		$424,304
Long-term liabilities	1,364,793		139,353		—		(50,415		)	1,453,731
Total shareholders’ equity	1,093,526		233,078		95		(223,258		)	1,103,441
Total Liabilities and Shareholders’ Equity		$2,755,005		$2,807,080		$40,050		($2,620,659	)		$2,981,476

-14-

CARRIZO OIL & GAS, INC.

CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS

(In thousands)

(Unaudited)



	Three Months Ended June 30, 2015
	Parent Company			Combined Guarantor Subsidiaries			Combined Non- Guarantor Subsidiaries			Eliminations			Consolidated
Total revenues		$660			$122,891			($57	)		$—			$123,494
Total costs and expenses	96,843			106,409			(216		)	(6,469		)	196,567
Income (loss) from continuing operations before income taxes	(96,183		)	16,482			159			6,469			(73,073		)
Income tax (expense) benefit	33,664			(5,769		)	(55		)	(1,737		)	26,103
Equity in income of subsidiaries	10,817			—			—			(10,817		)	—
Income (loss) from continuing operations	(51,702		)	10,713			104			(6,085		)	(46,970		)
Income from discontinued operations, net of income taxes	838			—			—			—			838
Net income (loss)		($50,864	)		$10,713			$104			($6,085	)		($46,132	)



	Three Months Ended June 30, 2014
	Parent Company			Combined Guarantor Subsidiaries			Combined Non- Guarantor Subsidiaries		Eliminations			Consolidated
Total revenues		$1,206			$192,269			$—		$—			$193,475
Total costs and expenses	78,089			109,088			—		1,011			188,188
Income (loss) from continuing operations before income taxes	(76,883		)	83,181			—		(1,011		)	5,287
Income tax (expense) benefit	26,908			(29,381		)	—		400			(2,073		)
Equity in income of subsidiaries	53,800			—			—		(53,800		)	—
Income from continuing operations	3,825			53,800			—		(54,411		)	3,214
Loss from discontinued operations, net of income taxes	(895		)	—			—		—			(895		)
Net income		$2,930			$53,800			$—		($54,411	)		$2,319

-15-

CARRIZO OIL & GAS, INC.

CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS

(In thousands)

(Unaudited)



	Six Months Ended June 30, 2015
	Parent Company			Combined Guarantor Subsidiaries			Combined Non- Guarantor Subsidiaries		Eliminations			Consolidated
Total revenues		$1,250			$222,294			$—		$—			$223,544
Total costs and expenses	123,511			211,321			—		(5,301		)	329,531
Income (loss) from continuing operations before income taxes	(122,261		)	10,973			—		5,301			(105,987		)
Income tax (expense) benefit	42,792			(3,841		)	—		(1,410		)	37,541
Equity in income of subsidiaries	7,132			—			—		(7,132		)	—
Income (loss) from continuing operations	(72,337		)	7,132			—		(3,241		)	(68,446		)
Income from discontinued operations, net of income taxes	1,104			—			—		—			1,104
Net income (loss)		($71,233	)		$7,132			$—		($3,241	)		($67,342	)



	Six Months Ended June 30, 2014
	Parent Company			Combined Guarantor Subsidiaries			Combined Non- Guarantor Subsidiaries		Eliminations			Consolidated
Total revenues		$2,772			$347,915			$—		$—			$350,687
Total costs and expenses	133,640			198,997			—		2,209			334,846
Income (loss) from continuing operations before income taxes	(130,868		)	148,918			—		(2,209		)	15,841
Income tax (expense) benefit	45,803			(52,121		)	—		312			(6,006		)
Equity in income of subsidiaries	96,797			—			—		(96,797		)	—
Income from continuing operations	11,732			96,797			—		(98,694		)	9,835
Loss from discontinued operations, net of income taxes	(1,540		)	—			—		—			(1,540		)
Net income		$10,192			$96,797			$—		($98,694	)		$8,295

-16-

CARRIZO OIL & GAS, INC.

CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)



	Six Months Ended June 30, 2015
	Parent Company			Combined Guarantor Subsidiaries			Combined Non- Guarantor Subsidiaries		Eliminations			Consolidated
Net cash provided by (used in) operating activities from continuing operations		($29,397	)		$195,049			$—		$—			$165,652
Net cash used in investing activities from continuing operations	(337,518		)	(342,695		)	—		297,646			(382,567		)
Net cash provided by financing activities from continuing operations	360,238			147,646			—		(297,646		)	210,238
Net cash used in discontinued operations	(2,157		)	—			—		—			(2,157		)
Net decrease in cash and cash equivalents	(8,834		)	—			—		—			(8,834		)
Cash and cash equivalents, beginning of period	10,838			—			—		—			10,838
Cash and cash equivalents, end of period		$2,004			$—			$—		$—			$2,004



	Six Months Ended June 30, 2014
	Parent Company			Combined Guarantor Subsidiaries			Combined Non- Guarantor Subsidiaries			Eliminations			Consolidated
Net cash provided by (used in) operating activities from continuing operations		($122,961	)		$318,607			$—			$—			$195,646
Net cash used in investing activities from continuing operations	(146,432		)	(464,288		)	(21,554		)	167,235			(465,039		)
Net cash provided by financing activities from continuing operations	126,158			145,681			21,554			(167,235		)	126,158
Net cash used in discontinued operations	(5,582		)	—			—			—			(5,582		)
Net decrease in cash and cash equivalents	(148,817		)	—			—			—			(148,817		)
Cash and cash equivalents, beginning of period	157,439			—			—			—			157,439
Cash and cash equivalents, end of period		$8,622			$—			$—			$—			$8,622

-17-

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following is management’s discussion and analysis of the significant factors that affected the Company’s financial position and results of operations during the periods included in the accompanying unaudited consolidated financial statements. You should read this in conjunction with the unaudited interim consolidated financial statements included in this Quarterly Report on Form 10-Q and the discussion under “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the audited Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2014.

General Overview

Production and Commodity Prices. Total production for the three months ended June 30, 2015 was 36,118 Boe/d, an increase of 8% from the 33,319 Boe/d for the three months ended June 30, 2014 primarily driven by increased crude oil production in the Eagle Ford, partially offset by decreased natural gas production due to voluntary curtailments in Marcellus. Average realized crude oil, natural gas liquids and natural gas prices for the second quarter of 2015 were $54.86 per Bbl, $11.95 per Bbl and $1.49 per Mcf, respectively, which represent decreases of 45%, 58% and 52% from the second quarter of 2014, respectively. As a result, despite the increase in crude oil production, our second quarter of 2015 revenues of $123.5 million were 36% lower than our second quarter of 2014 revenues of $193.5 million.

Drilling and Completion Activity. See the table below for details of our operated drilling and completion activity by region:



	Three Months Ended June 30, 2015				As of June 30, 2015
	Drilled		Wells Brought on Production		Waiting on Completion		Producing		Rig count
Region	Gross	Net	Gross	Net	Gross	Net	Gross	Net	Rig count
Eagle Ford	20	16.8	17	14.1	26	21.6	226	199.9	3
Niobrara	5	3.0	3	1.5	17	9.6	115	48.8	—
Marcellus	—	—	—	—	11	4.3	82	26.3	—
Utica	—	—	—	—	—	—	4	3.1	—
Permian	—	—	—	—	—	—	—	—	1
Total	25	19.8	20	15.6	54	35.5	427	278.1	4

Financing Activities. On April 14, 2015, we commenced a cash tender offer for any or all of the outstanding $600.0 million aggregate principal amount of our 8.625% Senior Notes. In connection with the cash tender offer, we also redeemed on May 14, 2015 all of the 8.625% Senior Notes that remained outstanding following the cash tender offer. See “—Financing Arrangements—8.625% Senior Notes” for details of the tender offer and redemption of our 8.625% Senior Notes.

On April 28, 2015, we closed a public offering of $650.0 million aggregate principal amount of 6.25% Senior Notes due 2023. The 6.25% Senior Notes bear interest at 6.25% per annum which is payable semi-annually on each April 15 and October 15 and mature on April 15, 2023. The proceeds of $640.3 million, net of underwriting discounts and commissions, were used to fund the repurchase of the 8.625% Senior Notes in the tender offer described above, redeem the remaining outstanding 8.625% Senior Notes, and repay borrowings outstanding under our senior secured revolving credit facility.

On May 5, 2015, we entered into the sixth amendment to the credit agreement governing the revolving credit facility. The revolving credit facility was amended to, among other things, (i) establish an approved borrowing base of $685.0 million until the next redetermination, (ii) establish a swing line commitment under our revolving credit facility not to exceed $15.0 million and (iii) include seven additional banks to our banking syndicate, bringing the total number of banks to 19 as of the date of such amendment. As of June 30, 2015, $117.0 million of borrowings and $0.6 million in letters of credit were outstanding under our revolving credit facility.

-18-

Results of Operations

Three Months Ended June 30, 2015, Compared to the Three Months Ended June 30, 2014

The following table summarizes total production volumes, daily production volumes, average realized prices and revenues for the three months ended June 30, 2015 and 2014:



	Three Months Ended June 30,		2015 Period Compared to 2014 Period
	2015	2014	Increase (Decrease)		% Increase (Decrease)
Total production volumes -
Crude oil (MBbls)	2,028	1,678	350		21	%
NGLs (MBbls)	318	208	110		53	%
Natural gas (MMcf)	5,646	6,879	(1,233	)	(18	%)
Total Natural gas and NGLs (MMcfe)	7,554	8,127	(573	)	(7	%)
Total barrels of oil equivalent (MBoe)	3,287	3,032	255		8	%

Daily production volumes by product -
Crude oil (Bbls/d)	22,284	18,440	3,844		21	%
NGLs (Bbls/d)	3,494	2,286	1,208		53	%
Natural gas (Mcf/d)	62,042	75,593	(13,551	)	(18	%)
Total Natural gas and NGLs (Mcfe/d)	83,006	89,308	(6,302	)

Large accelerated filer

Accelerated filer

Non-accelerated filer

¨ (Do not check if a smaller reporting company)

Smaller reporting company